It’s been another day where the markets continue to remain in the doldrums. We’re nearing the recent market bottoms, as the market took a slight dip, filling some gaps before bouncing back by about 100 points from the day’s lows. However, there has been no significant movement or gain in the market. We’re currently just holding our ground in the range we’ve seen over the last two to three sessions.

While there’s no certainty whether the market will continue to fall in the coming days, it’s essential to remain optimistic. This optimism is crucial, as it’s the only mindset that will allow you to invest with a long-term perspective and hope for future returns. Of course, it’s important to have a strategy, set your exit plans, and follow a structured approach, but above all, you must stay positive. Without optimism, it’s challenging to make progress in the market, regardless of the strategy you follow—be it momentum, value investing, or any other approach.

Where is the market headed?

Market Overview

As mentioned earlier, the markets are currently within a tight range—spending most of the week within a 400-point range. The Nifty has fluctuated between 23,000 on the lower end and 23,400 on the upper end. It would be beneficial if the market stays in this zone for a few more days until the budget comes around, potentially injecting more volatility into the markets. Whether the trend is upward or downward remains uncertain, but the run-up to the budget may see short positions being covered, especially if there has been a lot of short selling. On the other hand, long positions, particularly those fueled by leveraged money, seem to have already been unwound somewhat during the market fall since the end of September.

Before the budget, Monday holds significance, as President Trump is expected to discuss upcoming economic plans, which could impact the dollar and, consequently, emerging market currencies like the Indian Rupee. There are lots of developments in the next ten days that could influence market movements.

Nifty Next 50

On the daily front, the Nifty ended the day down 0.47%, while the Nifty Junior showed some strength with a 0.76% gain. However, it hasn’t yet recovered to its breakdown point, but it’s still commendable to have gained 3,000-4,000 points in the past few days.

Nifty Mid and Small Cap

Mid-caps remained flat with a slight gain of 0.12%, while small caps were almost unchanged, down by 0.04%.

Nifty Bank Overview

The Bank Nifty, however, took a hit, down 1.5%, largely due to disappointing results from Axis Bank.

Advanced Declined Ratio Trends

The advance-decline ratio for the day stood at 255 advances versus 242 declines, meaning the market was fairly balanced in terms of stocks advancing or declining.

Nifty Heatmap

On the heatmap, Reliance was a major support, up 2.83%, with other stocks like ITC, Nestle, Tata Consumer, and L&T contributing positively to the market’s performance. On the downside, banking stocks like ICICI Bank, Kotak Bank, and HDFC Bank were weighed down by Axis Bank’s disappointing results, while IT stocks like TCS, Wipro, and Tech Mahindra also fell, following Infosys’ 5.8% drop.

Sectoral Overview

In terms of sectoral performance, it’s clear that the IT sector, Private Banks, and the Banking Index were the primary drags on the market, with declines ranging from 2.7% to 1.5%. On the other hand, Public Sector Enterprises, Real Estate, Energy, Infrastructure, Metals, and Commodities sectors helped lift the market. FMCG was a notable outperformer for the day, posting a 1% gain, while Pharma also saw a modest increase of 0.7%.

Looking at the performance over the past week, it’s been a mixed bag—half the sectors saw small gains, while the other half experienced losses. However, when we extend the timeframe to the last month and three months, the picture is less optimistic, with most sectors in the red. There hasn’t been any clear trend emerging on the upside for any sector.

Sectors of the Day

Nifty IT Index

As mentioned earlier, IT stocks were down 2.68%, with many of the top names in the sector slipping back to the trendline from where they had previously broken out.

Story of the Day : Are you able to stay with the strength in the market?

This is a critical aspect of high-performance portfolios. There’s no reward for holding on to losing stocks in the hope that they will recover. In fact, staying in losing stocks can create long-term issues, especially if those losses deepen over time.

Instead, it’s better to remain aligned with the stronger sectors and stocks in the market. By focusing on the strength, you avoid the negativity of holding on to stocks that aren’t performing well. It’s all too common to have a portfolio with several losing stocks, which can create a sense of uncertainty and doubt. This can erode your confidence in investing and lead to unnecessary mental strain, especially when you see other portfolios outperforming.

Staying with strength is vital because it allows you to ride the winners and let go of the losers. One way to assess whether you’re aligned with strength is by using simple indicators like the Golden Cross.

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Understanding the Golden Cross and Market Strength

We’ve previously discussed the Death Cross, where the 50-day moving average (DMA) crosses below the 200-day DMA. Today, we’re focusing on its opposite: the Golden Cross. This occurs when the 50-day moving average crosses above the 200-day moving average. A Golden Cross is a positive indicator, suggesting that the stock or market is in an uptrend.

Furthermore, a subset of the Golden Cross is when the price is also above the 50 DMA, and the 50 DMA is above the 200 DMA. Stocks that meet both criteria are considered to be in a strong uptrend. Let’s take a look at the number of Golden Cross stocks across various indices:

• Nifty 50: 38 out of 50 stocks are in the Golden Cross, which means 76% of the stocks are showing strength.
• Nifty Next 50: Only 14 out of 50 stocks are in the Golden Cross, meaning 28% are showing strength.
• Mid Caps: 56 stocks out of 150, or 37%, are in the Golden Cross.
• Small Caps: 50% of small-cap stocks are in the Golden Cross.

However, when we filter further to include stocks that also have their prices above the 50 DMA, the numbers reduce drastically. For example:

• Only 8 stocks in the Nifty 50 meet both the Golden Cross and the price-above-50 DMA criteria (16%).
• The Nifty Next 50 and Mid Caps show similarly low numbers.

This Golden Cross indicator helps assess whether stocks are in an uptrend, and filtering by price adds a layer of strength assessment. The sectors that are doing well according to this analysis include auto, where 27% of stocks are in the Golden Cross and 90% are showing strength in terms of price action.

On the other hand, sectors like PSU Banks and IT are struggling, with only 17% and 2% of stocks, respectively, in the Golden Cross, and an even smaller percentage meeting the price strength criteria.

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Applying These Insights to Your Portfolio

Evaluating the strength of sectors and stocks using these indicators is a useful way to structure your portfolio. If you’re holding stocks from weaker sectors, it may be time to reassess your position and consider moving funds to stronger sectors. Rebalancing your portfolio regularly ensures that you are riding the winners and ditching the losers.

At Weekend Investing, we conduct weekly and monthly rebalances, where we assess whether stocks should remain in your portfolio. This helps ensure that your capital is deployed in the best-performing sectors and stocks. Our Momentum Report tool allows you to analyze your portfolio’s strength by providing a momentum score, helping you track which stocks are strong and which ones are weak.

If you’re finding that certain sectors or stocks in your portfolio are underperforming, it’s essential to have a framework for addressing these issues. You may need to exit losing positions or rotate into stronger stocks or sectors. This proactive approach ensures your portfolio stays healthy and positioned for long-term growth.

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